Sifangda: Capacity release drives revenue growth

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Abstract Event Description The company released its 2012 performance forecast today. During the reporting period, the company achieved a net profit attributable to the parent company of RMB 30.25 million to RMB 35.59 million, a year-on-year decrease of 15% to 0%; and an EPS of RMB 0.25 to RMB 0.30. According to this calculation, 4 seasons...
Event description

The company released its 2012 performance forecast today. During the reporting period, the company achieved a net profit attributable to the parent company of RMB 30.25 million to RMB 35.59 million, a year-on-year decrease of 15% to 0%; and an EPS of RMB 0.25 to RMB 0.30. Based on this calculation, in the fourth quarter, the company achieved a net profit attributable to the parent company of 3.79 million yuan to 9.13 million yuan, a year-on-year growth rate of -55.01%~8.29%, a decrease of 59.06%~1.44% from the previous quarter; and an EPS of 0.03 yuan to 0.08 yuan in the fourth quarter. The EPS for the third quarter is 0.08 yuan.

Event review

The annual increase in revenue will not increase, and the profitability of fundraising projects will be released: the company announced that its product sales revenue in 2012 will increase by 19% year-on-year. However, due to the increase in production capacity, the depreciation expense of solid investment and the year-on-year decline in gross profit margin and R&D expenses increased by 50%. Above 100%, government subsidies decreased by more than 25% year-on-year. The company's annual net profit was still less than 15% compared with the same period last year. Overall, the steady progress of the company's investment projects has achieved certain results, and the future is expected to release the profitability of high-end products. The release of production capacity led to continued growth in revenue in the fourth quarter: in 2012, product sales revenue increased by about 19% year-on-year, which was an increase from the previous year's 15.16% year-on-year growth rate. Based on this calculation, the company's operating revenue growth in the fourth quarter, the chain growth rate will continue to expand. The company has steadily promoted the production line of compound super-hard materials for fundraising projects with the newly-added equipment “production while debugging and production while increasing production”. The benefits in the first half of the year have reached 8,848,500 yuan. We expect the expansion of operating income in the fourth quarter to benefit mainly from the further release of fundraising capacity. However, given that new capacity is being released, the increase in cost due to depreciation of fixed assets may make it unlikely that gross margin will continue to improve significantly in the fourth quarter.

Combined with the relatively high settlement efficiency of 4 years in the past year, the large increase in R&D expenses can lead to further increase in management expenses in the fourth quarter, which is the main reason for the increase in income in the fourth quarter. Of course, the influence of other factors is not excluded, which is subject to further verification of the annual report data.

The fundraising projects and over-raised projects have brought high growth, and capacity expansion and structural optimization have become the driving force for long-term profit growth. The investment in the project “composite super-hard materials industrialization” and “composite super-hard material products project” will help to further expand the company's market share. At the same time, the further expansion of high-end varieties will enhance the company's overall profitability. The ultra-finance project will also become the source of the company's long-term growth.

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